Textile Industry to Collapse Soon in Pakistan: Working on 50 % capacity

Pakistan is the 5th largest cotton producer in the world but is not among the top 10 textile exporting countries. According to the Economic Survey of Pakistan, in the last fiscal year, Pakistan exported a record $14.29 billion in the textile sector, which is 61.24 percent of the country’s total exports, but the current situation is not very good.

In an emergency letter to the Prime Minister of Pakistan Mr. Shahbaz Sharif, sent by the All Pakistan Textile Mills Association (APTMA)- the representative association of the industry- has informed the government that problems like supply chain disruption, shortage of capital, energy scarcity, non-availability of raw material, plant machinery, spare parts and difficulties in imports have put the textile industry in crisis. The letter states, “the textile industry is working at 50% production capacity and monthly textile exports are expected to be less than one billion dollars from next month”. The association informed the Prime Minister that the cotton crop has been severely damaged by the floods; currently, the textile industry requires 14 million cotton bales, while only 5 million cotton bales are available in the country.

The textile industry is facing a severe shortage of capital; with a 60% fall in the PKR (local currency) value as compared to last year and due to non-timely payments of re-funds, the industry is bearing a financial crunch. According to APTMA, the supply chain is adversely affected and the textile industry’s production, operations, and cash flow are damaged ruthlessly. The export industry is under huge pressure and is having problems with the repayment of loans, which threatens to default export units.

It is mentioned by APTMA that Punjab province industries are being given expensive Regasified Liquefied Natural Gas (RLNG) as compared to Sindh province industries, so consequently, competition has become tough for Punjab industries while new RLNG connections are also not being given. Similarly, the textile industry is also having trouble with a continuous interruption of power supply. In the name of maintenance, electricity is not available for at least five to six days in a month, due to which the production capacity of electricity-operated industries has been reduced by 25%.

The letter said that in the last two years $5 billion was invested in the textile industry to set up new factories, many of which are almost complete, and some of them are under construction. The plant machinery which was imported for these factories is not getting clearance at the seaport while letters of credit (LCs) are not being opened for the import of spare parts. APTMA has appealed to the federal government to intervene in the situation and instruct the concerned quarters immediately to remove the obstacles to the clearance of machinery.

EAT News talked to Gohar Ejaz Pattern in Chief APTMA on this issue, he said, “the textile industry should be restored to the status zero-rated industry. The textile industry is closing down and unemployment is increasing in Pakistan. The sales tax refund mechanism should be flawless. Several aspects of the refund system have been described as flawed and have been asked to be fixed immediately. This is the reason 1600 textile units closed, 5 million people attached to this industry are jobless, and more than 30 million people are directly and indirectly affected”.

In a telephone conversation Mr. Aatif Munir, President Faisalabad Chamber of Commerce and Industries (FCCI) told EAT News, “Textile is the largest industrial sector in Pakistan with 40% of total industrial labor of the country. After the recent multi-fold increase in electricity and gas prices, they can’t compete with the global market due to which additional machinery for the textile sector could not be installed. Moreover, half of the factories have closed down and in a city like Faisalabad, 1.5 to 2 million people associated with textiles have become unemployed, indeed it is an alarming situation”.

The crisis in Pakistan’s textile industry has intensified as the country’s top textile group stopped the production of yarn. Koh Noor Mill has announced the temporary suspension of production. In the statement by the company, it is said, “due to international restrictions, domestic economic situation, high cost of raw material, and decrease in sales, it was not possible to continue production”. According to the company, it will consider resuming production in the first quarter of next year when conditions will improve. Pakistan’s textile industry is facing a crisis due to a shortage of energy, the high cost of production, inflation, and the unavailability of cotton.

On the other hand, the Asian Development Bank’s Central Asia Region has released the Economic Cooperation Energy Outlook Report in which it is said that Pakistan needs to invest $155 billion in the energy sector as Pakistan is facing serious problems like circular debt in the energy sector while there are also some transmission and distribution problems in this sector. Similar comments have been released by the Pakistan Business Forum, which declared 2022 as one of the worst years in terms of the economy of the country. The forum suggested that the government has to take concrete steps to address the issue including relief, rehabilitation, and reforms.

APTMA not only sensitized the sitting government about the problems faced by the industry but also demanded to solve these issues. If the problems will not be solved immediately, the textile mills will be closed down. According to economic experts, the crisis in the textile industry will strengthen the foreign exchange disaster in the country. Economic problems can become more serious due to a decrease in exports and unemployment, so it is necessary to take urgent steps to reduce the production cost of the country’s largest export industry.